This thesis is a collection of three independent essays studying the effects of mergers and divestitures on welfare and their implications for competition policy in Europe and the United States. I develop a novel methodology to easily assess the price effects of mergers and divestitures in vertical markets. I also provide empirical evidences for three landmark mergers cleared conditional on divestitures; and identify economic mechanisms explaining these effects.
In the first chapter, I present a novel empirical framework that leverages easily accessible sales data to calculate bounds on upstream bargaining weights among manufacturers and retailers at the brand level. With this approach, I examine the impact of changes in bargaining weights under varying scenarios. Specifically, I analyse a landmark U.S. merger, approved conditional on divestiture in the deodorant market, and its effect on bargaining power, final prices, and consumer surplus. Compared to a no-merger scenario, I estimate an increase in bargaining power associated with divested brands and a decrease related to the brands of the merged entity. This shift contributes to an overall rise in consumer surplus. Furthermore, I simulate consumer surplus outcomes under alternative divestiture packages, revealing an alternative package with fewer divested brands that could have improved consumer welfare.
In the second chapter, co-authored with Morgane Guignard, we analyse a large upstream joint venture with divestiture in the French coffee market. First, we show that divestiture can lead to marginal cost savings for the buyer of the divested brand. Second, we study policy recommendation on the choice of the buyer of the divested brands. Our results reveal that, accounting for upstream bargaining, the standard policy recommendation corresponding to request divestiture to small recipient firms might not hold.
In the third chapter, I investigate how divestiture affects prices and welfare in the presence of price coordination. I use a large divestiture in the U.S. beer market as case study. First, I find that price coordination materialised through conduct parameters is a countervailing force limiting the pro-competitive effects of a divestiture. Given current estimates, price coordination eliminates about 66% to 88% of the welfare benefits caused by a divestiture. Second, based on counterfactual simulations, I show that a merger cleared with divestiture is likely to deteriorate consumer surplus more than a merger approved without divestiture. Third, antitrust authorities need to take into account diversion ratios for products owned by the buyer of the divested brand and the potential coordinating partners when assessing the suitability of the buyer of the divested brand.